What Will Happen to the Expected Return on a Stock

question 11

Multiple Choice

What will happen to the expected return on a stock with a Beta of 1.5 and a market risk premium of 9% if the Treasury bill yield increases from 3% to 5%?

• A)the expected return will remain unchanged
• B)the expected return will increase by 1.0%
• C)the expected return will increase by 2.0%
• D)the expected return will increase by 3.0%

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Definitions:

Security Thread

A thin strip of metal or plastic embedded in paper currency and valuable documents as a measure against counterfeiting.